Professor Jem Bendell

notes from a strategist and educator on social and organisational change

From bailouts to a better capitalism

Posted by jembendell on September 26, 2008

What do you think about the current financial crisis? Im focusing on this topic in the next issue of the Journal of Corporate Citizenship, so would welcome your thoughts…

A bailout of any banks using public funds should only occur in return for those banks agreeing to act more explicitly in the public interest in concrete ways.

Thus, participating banks must have to agree to:

a) ensure no reduction of banking facilities provided to the general public in the next year and seek to reach more unbanked from disadvantaged communities
b) suspend all potential bonuses for the current year, and roll these into a new bonus system based on performance over 4 years, which must not total more than an equivalent of double a salary during that period
c) within one year complete and publish a carbon audit on all investments and loans, and a plan to reduce the carbon profile of investments and loans through shifting their portfolio or engaging the management of those investments or debtors
d) provide an equity stake for the government to ensure that if toxic assets do not recover their value that the government has some share of the banks other assets
e) pay more tax in the country they are headquartered if their global profits increase, no matter where those profits are booked
f) sign up to the UN Principle on Responsible Investment (UNPRI) to learn how to be a more socially progressive financial institution.

Then, in the longer run, we need to plan and facilitate a slow transition to a more balanced global financial system, one that: curbs all speculation; limits shortselling and derivatives; moves back from fair value accounting to a more concrete assessment of assets; deals with the problem that all money enters the economy as debt which necessitates unsustainable rates of economic growth and bubbles; creates new duties of responsibility on bearers of private property rights (both financial and non financial); does not let a financial institution become so large that it can either manipulate the system or threaten the system if it gets into trouble; achieves more tax harmonisation across national jurisdictions.

7 Responses to “From bailouts to a better capitalism”

  1. Arie said

    I have written about the opportunities presented by the current financial crisis on my blog, thogh it has a more social focus I do think it is relevant: http://blcubed.wordpress.com/2008/08/21/the-inevitable-financial-crisis-we-are-all-faced-with-an-opportunity-for-social-change/

  2. Shari Aaron said

    Appreciate your point about banks acting more for the public interest – your points are important ones! I am not seeing how to connect your solid thinking with the leaders who are making today’s financial bailout decisions as the SRI community and advocates don’t appear have a significant share of the mainstream conversation.

    It is key to find ways to bring these ideas and messages to the public or mainstream conversation. There is so much confusion right now as to how deep the problems are and what the solutions should be. Your messages need to be well branded and brought to the public in order to have a clear impact. I think they can also work to help with the anger and frustrations felt by so many. Thanks for sharing your work!

    Shari Aaron

  3. jembendell said

    You are right that SRI and responsible investment have not been mainstream, even though many in that arena claim to have mainstreamed…

    There is a need for new coalitions and networks to pursue a strategy that communicates the needed changes to the financial system. There are some initiatives in the pipeline, but nothing that comprehensive or visible.

  4. Jerry Flach said

    I think we should speak more about the Precautionary principle or lack there of; that is development will continue to do harm unless we implement policies and ethics to vet our choices vs. long term enivonmnetal, human and economic impacts.

  5. Hi Jem

    Your point d) reflects the example of the Swedish Bank Crisis. One good recent news story at:

    How Sweden Solved Its Bank Crisis – NYTimes.com
    When they faced a financial crisis similar to the United States’ in the early 1990s, Sweden took equity in the banks to protect taxpayers.
    http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html

    I love the idea of bailout on condition of SRI implementation, I’m worried how this approach may be perceived by the finance sector and concerned individuals. Rather than limiting the future potential to recover earnings, the case would have to be clearly laid out that this approach does make sense in the long-run.

    I look forward to reading your final article!

    Best wishes from sunny but cold Geneva.

    Nadine

  6. matslats said

    My hobby is writing community software to support LETS and other kinds of local money.
    I think such talk of conditions and regulations is either way too late or way to early. And it’s a subject for experts and governments. Restrictions have been put in place after previous financial disasters, and then removed…
    What we should be focussing on is how to rely less on profit-making financial institutions. No-one should profit from creating money – it’s a recipe for disaster.

  7. hiddenvalue said

    There is a lot of soul searching at the moment in the asset management / SRI community. I track some of it on my blog http://www.hiddenvalue.org. Anyone who is interested in what is currently happening and has strong views about it will also find this short survey on the causes/effects of the financial crisis interesting: http://www.aqresearch.com/your_say_on_crisis. Results will be out shortly after 18 Oct.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

 
%d bloggers like this: